INCREASE IN MINNESOTA'S HEALTH CARE TAX SET FOR 2004

St. Paul, Minnesota - The Pawlenty administration's budget is based on Minnesota's health care tax returning to 2 percent - 0.5 percent higher than the current level of taxation, says Citizens' Council on Health Care (CCHC), a St. Paul-based health care policy organization.

The MinnesotaCare provider tax on health care services was established in 1992, and set at 2 percent. However, in 1997, the Minnesota legislature temporarily reduced the tax to 1.5 percent beginning January 1998. For five years - half the life of the tax - the legislature has maintained that temporary reduction. However, on January 1, 2004, the tax will increase to 2 percent unless the legislature moves to extend the reduction - a move that could be made more difficult by the fact that the Pawlenty budget is based on the tax returning to 2 percent.

"We understand that returning the provider tax to 2 percent is technically not a tax increase, but for all practical purposes, it will look and feel like a tax increase," says Twila Brase, president of CCHC.

The Minnesota Department of Finance provided CCHC with numbers showing the increase in revenue that will result from allowing the tax to return to 2 percent:

YEAR INCREASE IN REVENUE
2004 $23.8 million
2005 $82.2 million
2006 $90.1 million
2007 $98.3 million

HIGHER HEALTH CARE COSTS
Combining 1998 - 2002 DOR information with previous information gathered for CCHC's 2000 report on the provider tax, more than $1.28 billion in taxes have been paid by health care professionals, hospitals, surgical centers, wholesale drug manufactures and pharmacies. The tax dollars fund the MinnesotaCare subsidy program, the Minnesota Department of Health, the Board of Dentistry, a legislative commission, the University of Minnesota managed care physician training program, the Minnesota Department of Human Services and the Minnesota Department of Revenue.

Total annual revenues from the health care tax are significant, according to information from the Minnesota Department of Revenue (DOR):

YEAR TOTAL REVENUE
1998: 131.7 million
1999: 146.5 million
2000: 158.6 million
2001: 171.3 million
2002: 190.1 million
2003: 204.6 million (budgeted)

"Health care taxes are always passed on to the patient, in higher costs or decreased access to care," says Brase.

SUGGESTIONS OFFERED BY CCHC:
To reduce the cost of health care and reduce need for health care tax revenues, CCHC offers the following four suggestions to the Minnesota legislature and the Pawlenty administration:

1) Repeal the MinnesotaCare provider tax on health care services.
2) If not repealed, keep the tax at 1.5 percent.
3) Use all tax revenues solely for the patient care expenses of the MinnesotaCare subsidy program, not for other initiatives.
4) For transitioning funding for the MinnesotaCare subsidy program from practitioners and patients to the general public, eliminate the health care access fund and move provider tax revenues into the General Fund.

"Minnesota has been taxing the sick for a decade. If the MinnesotaCare program is important to the public, tax the public, not patients," says Brase.

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